What Alibaba's record IPO will do for China-US relations
- By He Weiwen
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E-mail China.org.cn, September 25, 2014
The US IT Innovation and Capital Market will Contribute to Shaping the Alibaba Empire
Alibaba is a typical private business with different international resources. Apart from a large investment from Masayoshi Son, Chairman of Soft Bank, Japan, the rise of the Alibaba empire has been strongly influenced by US IT innovation. As early as 1998, Jerry Yang, founder and president of Yahoo visited the EDI center of Chinese Ministry of Foreign Trade and Economic Cooperation and started their cooperation. Jack Ma was then working at EDI and they became acquainted. Two years later, when the dot.com crash hurt the American internet sector badly and Alibaba was in difficulty, Jack Ma launched the 2001 Annual Gathering of Clients in New York City in early December, less than 3 months after the 9/11 attack. The gathering became very successful. During the following years, Google，Amazon, Face-book, E-Bay made surprising successes with continuous innovation in internet technology and innovation in connectivity. Alibaba learned all the best lessons, and created its own business model and entire supply chain connectivity, instead of simply copying. Now, with its IPO at the NYSE, Alibaba has gained access to the world largest and most sophisticated capital market and vast resources of capital, and thus started a new phase of global growth.
Alibaba Will Shape China-US Market Connectivity
On the other hand, Alibaba's American IPO and subsequent global growth will also contribute to shaping China-US market connectivity, both electronically and physically. Alibaba's growth strategy in America will not be symbolized by a factory or warehouse build-up, but rather by extending its services to American suppliers and consumers. It will expand and upgrade a strong e-commerce platform for the on-line sale of American goods in China, or Chinese online shopping of a vast variety of consumer goods, from food and drinks, home appliances, consumer electronics, iPad and iPhone, to home furnishings, etc. It will eliminate the physical distance and bring American suppliers and Chinese consumers side-by-side, similar to shopping online. The conventional e-commerce will become cross-border e-trade. Chinese online sales to the US will also grow. The growth of online shopping will naturally need online payment, smart logistics services, and online customs services, and will certainly be accompanied by an increase in physical facilities, such as product show centers, warehouses, and after-sale service facilities.
Beside the e-trade in goods, Alibaba is likely to help the bilateral trade in services. The US is already pretty strong in its service exports by digital delivery, or digital delivery services (DDS). In 2011, the US DDS exports amounted to $357.4 billion, 60% of its total export in services; and its DDS imports amounted to $221.9 billion, 56% of its total import in services. However, the US DDS has mostly been individual service providers, such as design, loyalties. Alibaba should and could create a more extensive platform for different service deals and deliveries. The platform could also serve the other way round, or DDS of Chinese services to the US. In this sense, Alibaba's new global strategy and performance will contribute to China-US market connectivity.
Inevitably, Alibaba has to compete with Google, Amazon, E-Bay and Facebook. The competition in innovation, marketing and services will make the whole connectivity faster and better. Just as a number of large companies, including Boeing, GE, IBM, GM, Ford, Lenovo, Haier, are connecting both Chinese and American markets, a number of leading e-commerce companies, including Alibaba, Google, Amazon, E-Bay, Baidu and Tencent and Facebook will connect the two markets electronically. The two economies, once solidly based on the connectivity, will have a solid relationship and share mutual benefits.
The trade rules governing China-US trade, and international trade as a whole will have to change. Cross-border e-trade has made existing measures inadequate, and requires new rules regarding border governance. In this sense, Alibaba's globalization could also contribute to trade rules, including China-US bilateral investment treaty (BIT) talks and a future free-trade-agreement.
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